Mikhail Krutikhin: “The parameters of the agreement with the Saudis were an unpleasant surprise”

This was told on the air of the 2020 program on the Ekho Moskvy radio station by an oil business expert, partner at RusEnergy consulting company, economist Mikhail Krutikhin.

“It was obvious that Russia and Saudi Arabia would nevertheless come to some kind of an agreement. But it was expected that our countries would split the quota for oil reduction on an equal footing, but it suddenly turned out that for some reason Russia took over the bulk of the reduction in production.

Saudi Arabia is also cutting back, but compared with us quite a bit. This came as a surprise. There is a version, especially in the Arab East, that this is such a form of punishment for Russia for its behavior.

In my opinion, there was no sense in the demarche that Russia had carried out before.

There have always been many violators of discipline in OPEC. Discipline suffers constantly. Russia has contributed.

For three consecutive years, we have not reduced production. Energy Minister Alexander Novak constantly made statements: “We are in solidarity with OPEC +, we are cutting back.” But according to statistics, it is clear that every year our production is slightly, but increased. And to the whole world we said the opposite. It was a lie.

That is, the Saudis finally said: “Guys, you need 1.5 million barrels per day!” And then we began to slam the door.

It turns out that for three years we have been parasitizing in Saudi Arabia, which really reduced production. Prices were rising, and we, of course, made additional contributions to our budget and could still save something in the National Welfare Fund.

Roles have changed. Now the Saudis are very slightly reducing their production - according to various estimates, they should reduce 1-1.5 million barrels per day, and we should 2.5 million barrels per day (23% of production). Now the Saudis will parasitize on us.

I now suspect that now one of Trump’s levers, which forced Russia to make a very shameful decision on OPEC +, was the threat of either introducing some new sanctions or a promise to lift some sanctions. In general, they were bargaining about something.

If Russia will, as before, lie and violate the agreements, I think the measures will be applied. Canada is already hinting that barrage tariffs will follow. And then it can be an embargo, it can be sanctions against Russian companies and against companies that buy Russian oil. Refusals of Russian oil in some markets have already begun.

But even without these measures, if we suddenly begin to practically reduce production, this will mean that tens of thousands of people will be left without work, because there are not only oil workers, these are companies that serve them. A gigantic multiplier effect will follow throughout the country. The oil industry is really the backbone of our economy.

Then, even if prices rise a little, a reduction in our exports by half — and this is what the formula says — means less money will come to the budget. That is, the budget will probably have to sequester and cut budget revenues.

Naturally, some officials and punitive will save some income, and many others. But education, science, medicine and everything else - they will have to do it badly.

Most likely, there will be accelerated devaluation of the national currency, there will be inflation, there will be a problem with prices for imported goods. And 65% of the goods that we see - from telephone sets to cucumbers and onions - this is precisely imports. Instant price increases mean worsening living conditions for people.

In general, this whole chain reaction will turn on from the measures we must take.

This is a difficult future. And if an embargo on our oil is announced, it will be an economic collapse.

The fact is that we have proclaimed oil and gas and the general direction of the economy as our main task, and in our recently adopted Doctrine of National Energy Security, we said that “the challenges for Russia are the development of advanced technologies, renewable energy, energy conservation, energy efficiency” . And all that the world is heading for is foremost - these are risks and challenges for us. And here we are aimed at driving raw materials to developed and undeveloped countries. And we have stood and will stand in principle. That's where we drove ourselves.

When we do not, according to the formula of other countries, not together with foreign companies, but instead of foreign companies, proclaim self-isolation of the Russian economy, import substitution, and so on, when they shout that sanctions are not the worst with us ...

Guys, behave yourself, and there will be no sanctions. If Russia behaved as a civilized member of modern society, would not behave as an aggressor, invader, war criminal, poisoner and the hell knows who, well, there would be no sanctions, there would be international cooperation.

Open your investment climate to other companies, share technology, people, capital. If you really take it together, you can do a lot in terms of energy development and curbing prices. Everything could have been decided if all this had been done together through normal efforts, and not in the form of such an opposition to the rest of the world”.